Forget Government Data; Watch the Bacon Cheeseburger Inflation Index

One of the biggest mistakes I see both institutional and individual investors make is to rely on either one data point or only one data source to make their investing decisions. One of the lessons I learned a long time ago is to look for confirming data points and to let the data “talk to you.” I have seen many, many times when people are looking for data that supports the outcome they want rather than listening to data for what is really happening.

One source of data is the U.S. federal government and its various departments, such as the Bureau of Labor Statistics and the Census Bureau. Another source is the Federal Reserve, which has its hands on the wheel when it comes to monetary policy. As any sandbox economist can tell you, monetary policy is one of the tools used to goose economic growth or cool it down a bit to temper inflation.

It would be nice to think those data sources were painting a complete picture, but they aren’t. In some cases, the data they furnish can be misleading. For example, despite the “official” statistic telling us there has been little inflation, we all know that food and gasoline prices have made significant moves. From beef and pork prices to coffee, cocoa and others, I know you are feeling the pain because I am feeling it, too.

But the government doesn’t seem to see it. Or at least the government’s data doesn’t.